US officials, experts hold high hopes for S&ED forum

Despite widespread concern that bilateral relations between the world's two largest economies have been heading downhill lately, US officials and experts expressed their optimism that the upcoming sixth meeting of the China-US Strategic and Economic Dialogue (S&ED) will help get things back on track.

US Secretary of State John Kerry and Treasury Secretary Jack Lew will fly to China next week as President Barack Obama's special representatives to the S&ED, to be held in Beijing on July 9-10. They will be joined by their Chinese counterparts: State Councilor Yang Jiechi and Vice-Premier Wang Yang.

Describing the past year as one full of a number of events that have affected the bilateral relationship, Lew said on the economic side, there has been an important breakthrough in China's approach to the Bilateral Investment Treaty.

"We have also seen some rockier things. It's not a straight line that only goes to progress," he said at a Tuesday morning meeting in Washington hosted by the US-China Business Council.

Growing tensions over maritime territorial disputes in the South and East China seas between China and US allies Japan and the Philippines and cyberespionage have made constant headlines in the past year.

"What we have to do is keep reminding each other how we can continue to make progress," Lew said. "So I am optimistic that we are going to be able to make some progress again this year."

Lew said there were some 60 issues the two sides are working on for the S&ED and a lot of progress has been made in the last 10 days.

China's currency exchange rate, market access and its commitment to economic reform as laid out by the Third Plenum of the 18th Party Central Committee are some of the key concerns for the US side, according to Lew.

China has expressed its concerns that the growing Chinese foreign direct investment in the US is facing unfair scrutiny by the Committee on Foreign Investment in the United States. Some US lawmakers like to politicize Chinese FDI.

While arguing that economic reform measures will be good for both China and the US, Lew admitted that the Chinese side has legitimate concerns about managing change in a way that doesn't cause unnecessary social and political upheaval.

The S&ED is a great platform for people on both sides to get to know each other and develop relationships, such as between ministers and counterparts, Lew said.

"I think our ability to do business through the whole year is very much molded by the engagement at the S&ED," he said.

While many worry that the indictment by the US Justice Department a month ago of five People's Liberation Army officers for cybertheft will cast a shadow over the upcoming S&ED, Lew said the S&ED is a valuable forum for the two sides to engage each other frankly and directly on challenging issues, while making progress on issues whose common interests align more easily.

Ben Rhodes, the White House deputy national security adviser for strategic communications, also said the US is optimistic that the two countries can make good progress at S&ED in terms of practical cooperation.

"If we have differences in one area, it need not derail the entire bilateral relationship, because both of us have so much at stake in that bilateral relationship. And in fact the world has a lot at stake in that bilateral relationship," Rhodes told a news conference on US foreign policy on Tuesday.

While Lew did not say whether the bilateral cyber working group will still meet at S&ED after China announced it would suspend the group following the US indictment, Rhodes said his expectation is that there is going to be a cyber dialogue.

China has urged the US to revoke the indictments, and threatened to take countermeasures.

Douglas Paal, vice-president for studies at the Carnegie Endowment for International Peace, described the indictments as a "non-strategic move" by the US that is not going to help solve the problem.

Carla Hills, the former US Trade Representative who now chairs the National Committee on US-China Relations, is also optimistic about the upcoming S&ED.

"My hopes are always high. And I hope we can work more closely together on a number of issues," she said, citing as examples the environment and climate change.

"Sunnylands was a high peak, and we have the opportunity to make another high peak," Hills said.

"If you and I disagree, I should be quiet and listen, and see whether I can find a way to serve my national interest that does not bother your national interest."